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Idaho LLC
Operating Agreement

An Idaho LLC operating agreement is a legal document that lays out the organizational structure of your LLC. It covers important business procedures, such as voting, transferring membership interest, allocating profits and losses, and dissolution (should it ever come to that).

Your operating agreement is an internal document, which means it isn’t filed with the Idaho Secretary of State—however, it’s one of the most important internal documents to have on hand. Knowing this, we at Northwest provide a range of free, attorney-drafted templates for operating agreements that you can use to create the right operating agreement for your business.

Why should an Idaho LLC have an operating agreement?

An Idaho LLC should have an operating agreement because a company cannot act for itself. In order to operate, LLCs require real humans (and other entities) to carry out company operations.

While a written operating agreement isn’t required (per Idaho Statute § 30-25-102), your operating agreement is an essential document for many important aspects of your business, from opening a bank account to handling major events (like fighting lawsuits).

1. Your operating agreement proves you own your LLC.

In Idaho, you only need to include the name of one LLC member when filing your Idaho LLC Certificate of Organization. This is great for maintaining privacy, but not so great when it comes to showing proof of ownership. (You’ll need proof of ownership for tasks like opening a bank account and renting property.)

Because your operating agreement lists the names and addresses of all members, you can use it to show who owns your LLC.

2. An operating agreement can help reinforce your limited liability status.

To benefit from limited liability status, business owners have to show a clear separation between personal and business finances and interests. Formalizing LLC processes in an operating agreement helps demonstrate that the LLC truly functions as an entity separate from its members.

3. An operating agreement can help head off misunderstandings.

An operating agreement establishes rules for your company, which all members are legally obliged to follow. Should any misunderstandings or disagreements arise, a strong operating agreement can help you nip ‘em in the bud.

4. An operating agreement can override Idaho’s default laws.

If you don’t have an operating agreement, your LLC will be governed by Idaho’s state statutes. The problem is, Idaho’s default laws may not totally fit in with your business model. Creating your own operating agreement will help you customize your LLC’s internal operations in a way that works for you.

Idaho Case Law

We asked our lawyers for an example of how an operating agreement can make or break your LLC. Here’s what they said.*

“Consider the case of Johnson v Crossett, where two individuals decided to pursue a business venture together. Following a handshake (unwritten) agreement, one of the individuals proceeded to form a single-member LLC. Later, the two individuals met to discuss the final touches on a draft operating agreement. While the two came to an understanding on the details, they both failed to actually execute the operating agreement. As a result, the second individual was determined by the courts to NOT actually be a member of the LLC. Litigation eventually occurred between the two original individuals, however the courts found in favor of the sole member of the LLC.

“Had the members of the LLC taken the time to plan ahead, discuss potential pain points, and distill their collective understanding into a written operating agreement, this dispute likely could have been avoided entirely.”

What is included in an Idaho operating agreement?

Technically, your operating agreement can include anything not covered by Idaho’s state statutes (within the parameters of the law). But a good operating agreement will include information about:

  • Transfer of membership interest
  • Voting rights and decision-making powers
  • Initial contributions
  • Profits, losses, and distributions
  • Management
  • Compensation
  • Bookkeeping procedures
  • Amendments
  • Dissolution

Idaho LLC Operating Agreement Template

Here are our LLC operating agreement templates. Select the one that best suits your LLC below.

FAQs

Is an operating agreement required in Idaho?

Technically, no, a written document is not required. But if you don’t have a written operating agreement, your business operations will be restricted to Idaho’s default laws.

Do I have to file my operating agreement in Idaho?

No. Your operating agreement is an internal document, which means you’ll keep it on file with your personal records.

Does a single-member LLC need an operating agreement?

Actually, yes. It may seem strange to create an agreement with yourself, but even a single-member LLC will need an operating agreement for some tasks. For example, as a legal document, an operating agreement is important to have for opening a bank account and proving your limited liability status.

*This is informational commentary, not advice. This information is intended strictly for informational purposes and does not constitute legal advice or a substitute for legal counsel. This information is not intended to create, nor does your receipt, viewing, or use of it constitute, an attorney-client relationship. More information is available in our Terms of Service.

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